Question
1.Sears is evaluating the choice between paper check disbursement and ACH disbursement. Sears would incur up-front investment costs of $40,000. Based on a perpetuity of
1.Sears is evaluating the choice between paper check disbursement and ACH disbursement. Sears would incur up-front investment costs of $40,000. Based on a perpetuity of 1,000 payments per month, per-payment savings if 40 cents, annual cost of capital is assumed to be 5%.
a.What is the NPV of the decision to convert to ACH?
b.What is the minimum number of payments per month in order to justify the cost to convert to ACH disbursing?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Markets And Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
9th Edition
0134519264, 9780134519265
